Defaqto report paints bleak picture for the Payment Protection Insurance market in 2007...
Lenders and intermediaries operating in the payment protection insurance industry are in for a very difficult year, according to a report by Defaqto, entitled “Payment Protection Insurance – 2007 – The year of reckoning”.
With annual PPI premiums totalling some £5.5bn, lenders are being faced with the challenge of handling what will inevitably be a decline in business this year, according to the report. Add to this continued pressure from the FSA and the prospect of Competition Commission sanctions on the horizon and the picture is “bleak”.
The report states: “No CEO or finance director is going to be happy at the idea that they should halve the commission they make from PPI policies, and no one is going to want to be the first to propose such an idea unless and until they are forced to by the regulators.”
Commenting on the report, Brian Brown, head of insight at Defaqto and co-author of the report said, “Like a Shakespearean tragedy, everyone knows that the outcome for the PPI industry will not be a happy one. However, the industry can still emerge with some dignity by embracing FSA regulation and by revamping how it promotes, sells and services its products”.
Getting firms to take this first step has proved incredibly difficult, but in the face of regulatory fines and their associated costs, Simon Burgess, managing director of Britishinsurance.com, hopes PPI providers and distributors will realise refusal to reform is false economy.
“The issues we are facing are well documented and there is no longer any real argument against the need for improved products, sales processes and competition in the PPI arena,” says Burgess.
“If firms fail to overhaul the way they design and sell PPI then many will have hefty fines to pay and costly appraisal and reconciliation programmes to complete for the regulator.” This will be more expensive than taking immediate remedial action he claims.
